PNG pressures Exxon to commit to gas field

PNG has demanded owners ExxonMobil and Oil Search commit to a development timeline for the P’nyang gas field.

The first shipment of liquefied natural gas from the Papua New Guinea project.

Papua New Guinea has demanded owners ExxonMobil and Oil Search commit to a development timeline for the P’nyang gas field in a further sign of tensions surrounding a $20bn LNG expansion in the Pacific nation.

The government and the two gas companies had targeted this week to update the market on the P’nyang development as the industry convenes in Port Moresby on Tuesday for the annual petroleum summit.

But signs of strain between the under-pressure PNG government and the Exxon-led negotiating team are mounting, threatening hopes of agreement between the parties by year-end.

“A timeline for development must be one of the fundamental conditions in any agreement,” PNG’s state negotiating team chairman Isaac Lupari. “Not agreeing to this makes us wonder if the developers really have any current plans to develop the project, or instead intend to warehouse the field.”

PNG claimed Exxon had demanded it secure a petroleum development licence before ticking off a checklist of early project commitments which normally include the front-end engineering and design phase and construction schedule.

“What Exxon has demanded is we deliver a PDL before they complete industry standard prerequisites required for a final investment decision, which could give them an excuse to defer the development,” Mr Lupari said.

Concern over the commercial terms between the two sides also needed to be resolved before a deal can be signed.

“In essence PNG has already determined we can achieve state benefits that are far greater than Papua LNG, while delivering an attractive return to the developer. We’ve already suggested to Exxon how we can resolve this sharing of benefits of the project based on international best practice,” Mr Lupari added.

Exxon said the talks were ongoing but would not comment on commercial discussions.

“An agreement is needed before decisions can be made regarding front-end engineering and design for the three-train development at the PNG LNG plant site,” a spokesman said.

The P’nyang project forms the second plank of a bid by Oil Search and Exxon to double LNG exports from the Pacific nation by 2024 after the companies and operator Total agreed to the first part of the enlarged facility through the Papua LNG contract in September. 

Both the Papua and P’nyang deals are required before the gas expansion can proceed.

PNG has been under pressure to win a better deal for the state over concern it failed to strike competitive terms for the original PNG LNG plant which started operating in 2014.